Should I (can I) refinance my mortgage?

Dan Fox and his wife, Mildred, have refinanced their mortgage not once, not twice or even three times, but four times since they bought their home in North Park three years ago. The financial decision was an obvious one because Dan Fox’s pay was cut and mortgage rates, now at all-time lows, kept tumbling.

For the past two years, U.S. mortgage rates have steadily dropped to the 3 percent range for a 15-year fixed loan and 4 percent range for a 30-year fixed, recent Freddie Mac figures show. Those rates could keep falling, in light of the Federal Reserve’s decision last week to reinvest in longer-term bonds to push down interest rates on mortgages and business loans.

Low rates have lured a small yet determined slice of qualified borrowers who want to reduce their monthly payments, save for the future, or in the case of the Foxes, both.

“Mortgage rates have dropped to a point where refinancing can make sense,” said Greg McBride, senior financial analyst for finance site bankrate.com.

What makes sense varies by borrower, motive and economic situation. If the math continues to make sense over time, some homeowners refinance again and again, even if the savings appear minuscule.

Still, for many San Diegans, refinancing could be impossible because they are severely upside down on their mortgage, their credit scores are too low, or both.

Real estate tracker DataQuick estimates 30.4 percent of homes in San Diego County that have a mortgage appear to be underwater. Zillow, another housing monitor, said about one in three people recently surveyed are highly unlikely to qualify for a home loan because their credit scores are too low.

“We still have a weak labor market,” said Mark Riedy, executive director of the real estate center at the University of San Diego. “I don’t see a flurry of refinancing because those who can’t (refinance) can’t, and those who can, they’re refinancing over and over again.”

What drives someone to refinance?

Refinancing and other non-purchase loan activity in San Diego County peaked at 32,522 recordings in July 2003, roughly two years before home prices hit their high point, according to DataQuick figures that date to January 1990. (See graphic above.)

That activity, which includes refinancing, home-equity loans and home-equity lines of credit, fell 94 percent to 1,817 recordings in November 2008, almost exactly when county home values hit their trough.

Since then, refinancing has ebbed and flowed but remains far below its peak because lenders have tightened their guidelines and borrowers have negative equity.

But for those who qualify, there are two major reasons consumers would want to refinance, said McBride, of bankrate.com.

The first is to secure a lower monthly payment. The most common scenario is someone refinancing a 30-year fixed loan to another 30-year fixed loan but with a lower interest rate.

The Foxes, of North Park, are a prime example. Their serial refinancing helped them cut their mortgage rate from 5.99 percent to 4.37 percent, translating over time to roughly $425 in monthly savings. And unlike many pre-recession borrowers who tapped their home equity lines to pay for wishlist items or home remodeling, the Foxes don’t plan to touch what’s left over for a while.